Docks buzzing with Vigor Industrial evolution

Originally published April 27, 2013 at 8:00 pm

Updated April 27, 2013 at 10:01 pm

Vigor Shipyard workers head toward the Olympic Class ferry Tokitae under construction. The 362-foot state ferry, which will carry 144 cars, will go into service in 2014. CEO Frank Foti aims for Vigor to expand to three times its current size, with international deals on the horizon.

Modular construction is being used to build the Olympic Class ferry Samish. The section being lifted by an overhead crane weighs about 30 tons. The ferry will be in service in 2015.

The Olympic Class ferry Tokitae takes shape on Harbor Island. Major shipyards have been closing in the U.S. for decades, falling victim to less expensive Asian rivals.

0
of 0

Frank Foti, the chief executive of Vigor Industrial, is a big guy with a broad face, bushy eyebrows that punctuate his stories, a room-filling laugh and hands that look as if they would be most comfortable gripping tools. He appears as if he’s run shipyards his entire career.

In reality, Foti was a go-go young executive at Comcast in the 1980s when he was called home to Cleveland to save the family construction business he had done everything to escape.

Now, at 56, Foti looks back with gratitude. “I learned what an artisan is: a person working with his hands. It’s a place where more truth is exchanged. It gave me a gut feel. I fell in love with the industrial worker.”

Today he oversees 2,000 of them at Vigor, which is based in Portland. A little more than two years ago, it became the dominant shipbuilding and marine-repair company in the Northwest with its $130 million acquisition of Seattle’s iconic Todd Pacific Shipyards.

Most Read Stories

Last year, Vigor expanded again, buying Alaska Ship and Drydock, giving it reach to the oil exploration and fishing business there.

If Foti has his way, Vigor will keep growing.

“Expansion is required,” he told me at a sit-down last week in Seattle. “An American industrial company has to find the right scale or find the end.”

The United States was the world’s dominant shipbuilder half a century ago. But like flat-screen televisions, photovoltaics, wind energy, advanced batteries and scores of other formerly American-developed and -led sectors, shipbuilding is now centered in Asia.

South Korea, Japan and China invested heavily to develop their shipyards, with close ties between government and business, big subsidies, protectionism and the further advantage of cheaper labor.

Major American shipyards have been closing since the 1980s, throwing tens of thousands out of work. The next casualty may be the huge Avondale yard near New Orleans, which at its peak employed 26,000. Efforts are being made to give a much-shrunken operation a new mission with oil and gas rigs, but it’s unclear they will succeed.

The survivors consist of 43 companies operating 85 yards, most of them small, that are members of the Shipbuilders Council of America. Foti is chairman. “It’s just my turn,” he said. Even some of these companies are units of foreign multinationals.

Yet none can build a vessel as quickly or inexpensively as their Asian rivals. Most business comes from military and state contracts, plus the Jones Act. That law requires ships that handle merchandise between U.S. ports to be built, owned and operated by U.S. citizens.

Olympia’s mandate that new ferries be built in the state allowed Vigor to win contracts to assemble the 144-car Tokitae and Samish at the former Todd yard on Harbor Island in Seattle. And that helps support 900 well-paid industrial jobs there.

The superstructures, or upper decks, are being done by Nichols Brothers Boat Builders on Whidbey Island, another survivor. (A third Puget Sound yard, J.M. Martinac Shipbuilding in Tacoma, failed to get a piece of the ferry contract.)

The Legislature decided on a consortium approach for the ferry projects to ensure that multiple Washington companies get the chance to do the work. Vigor is the prime contractor.

In addition to Nichols, major subcontractors include Eltech, Vigor’s electrical contractor based in Seattle, and Jesse Engineering, which builds the vessels ends in Tacoma.

The total value of the contracts for the two ferries is $224.7 million.

For Foti, the Todd acquisition has been an important part of building Vigor’s “critical mass.” It gives Vigor a second major yard beyond Swan Island in Portland. The latter will soon receive the largest floating dry dock in the United States and send its existing floating dry dock here.

“Seattle is a great maritime community and it cares a lot about more about maritime than I’m used to in Portland,” he said.

Sequester and military cutbacks are a worry, but Vigor is busy. The Navy frigate USS Rodney M. Davis and Coast Guard cutter Healy are undergoing work at Harbor Island. The icebreaker Polar Star is back in service after a $57 million renovation there.

Vigor workers are also performing pier-side maintenance on the aircraft carrier USS John C. Stennis at the Bremerton naval base.

Last year, revenue of the privately owned company hit $500 million. Foti is the majority owner. About 35 percent of Vigor’s business is building; the remainder is repair and refitting.

It’s a long way from 1995, when Foti arrived in Portland and bought struggling Cascade General. The shipyard was facing heavy debt. Foti’s equity partner soon declared bankruptcy. He sold a dry dock as part of emergency surgery that ultimately proved successful.

In repairing and renaming the company, Foti became an industrial evangelist. Now he speaks eloquently about the need for a more balanced American economy, with jobs in advanced manufacturing as well as software development and baristas.

“I’m talking about people making $60,000 to $90,000 a year making things with their hands,” he said. “They have a database of the eyes.”

To keep that database around, Vigor is putting $800,000 as seed money to help start a welding program at South Seattle Community College. The goal is to partner with government to develop maritime-training programs. Vigor has done the same in Portland.

“Long-term thinking needs to be part of every country’s economic conversation,” he said, emphasizing that “some companies are acting like countries, but some countries — Singapore, China — are acting like companies.”

For Vigor, his vision is to expand to three times its current size. International deals may be next. Vigor is particularly interested in Brazil, which is gearing up for oil exploration.

In Foti-speak, it’s the “industrial evolution” that will allow American shipbuilders to hang on and even thrive.